Residential stratified properties now ‘GST exempt supply’

This is really beyond Insurance but since this is about GST and certain types of residential properties where the application of GST would have significant impact on our daily lives, I think putting up a simple blog posting here makes sense…. but then this does not means insurance premium is GST exempt.

While there were postings over the media in recent days (highlighted one of those below), it is best we put forth some clarifications as to the use of the phrase, “GST EXEMPT” —- it is not a catch all phrase but instead has limitation in its application…. I would highlight as follow:

Only residential stratified properties are GST exempt.

1) If your JMB/MC also handled landed properties or if any of the apartments are used for commercial dwelling (e.g. as hotel rooms), the maintenance fee and sinking fund for these units are standard-rated and subject to GST.

2) The exemption is specifically for maintenance fee and sinking fund contribution, not for other charges, such as charges for use of badminton/squash/tennis courts, use of common hall, canteen etc.

3) The exemption also does not seem to apply to property developer who manages the property before handing over to the JMB/MC – Property Finance Division, please check with your GST consultant to confirm.

But it is important to note the GST applicable on the insurance premium of policies issued to those JMB/MC is still applicable since this insurance coverage is provided by the insurance company to the JMB/MC.

We have herewith append the Malaysian Sun Daily report:

CAPTION: Posted on 20 January 2015 – 09:02pm | Last updated on 20 January 2015 – 09:39pm (Adrian Phung)

PETALING JAYA: All residential stratified properties are now categorised as “Goods and Services Tax (GST) exempt supply”, said National Home Buyers Association (HBA) secretary-general Chang KimLoong.Previously, only low-cost and low-medium cost properties were granted such exemption.

Being categorised as “GST exempt supply” would mean that fees charged by a management corporation (MC) or joint management body (JMB) for maintenance and management, including a sinking fund, will be exempted from GST.

Chang said a petition was sent to the Finance Ministry on Nov 28 last year, appealing to the government to amend the GST Act 2014 to enable a GST zero-rated tax supply for maintenance charges, sinking fund and all forms of related contributions or charges payable by property owners.

The petition was undersigned by HBA; the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia; Royal Institution of Surveyors Malaysia; and Malaysian Institute of Professional Property Managers, representing six million property owners and occupiers of approximately 15,000 stratified development areas in Peninsular Malaysia.

“From the reply we received from the tax division secretary of the ministry, Datuk Siti Halimah Ismail on Jan 15, it was stated that the appeal for GST zero-rated tax supply cannot be considered for the services rendered by MCs and JMBs to residential parcel owners of stratified properties because the supplies provided by them are deemed as conducting a form of business.”

“However, the ministry is agreeable to widen its GST exempt supply by including all categories of residential stratified properties,” he told a press conference yesterday.

Chang added that amendments will now be made to Paragraph 20, Second Schedule, of the Goods and Services Tax (Exempt Supply) Order 2014.

He pointed out that any fees charged to stratified buildings or parcels that is used for purposes other than residential will still be subjected to GST standard rated tax.

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2 comments for “Residential stratified properties now ‘GST exempt supply’

  1. joe
    August 3, 2015 at 15:41

    How come last year our appartment insurances were not charged with Service tax but now those insurances are charged GST?

    • October 4, 2015 at 08:03

      GST is absolute unless exempted or zero rated. Service tax is always subject to interpretation. …The insurer gets penalised only if the tax authority finds out.

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